Four factors drive the high-frequency impact of monetary policy announcements in South Africa: affecting short-, mid-, and long-term yields, and country risk. Controlling for information effects, we build IVs for conventional monetary policy, forward guidance, term premia, country risk and information shocks. Conventional monetary policy has textbook contractionary effects. Policy communication, particularly forward guidance, has persistent effects on output and prices. Country risk is a novel and powerful channel of monetary policy communication in emerging markets. By defending its independence, restating its inflation target, and addressing external shocks, the central bank can mitigate country risk and generate expansionary effects..

This paper analyzes how the South African Reserve Bank (SARB) communicates uncertainty and the confirmation of expectations within its Monetary Policy Committee (MPC) statements. Using a text-based narrative approach, we construct specialized sentiment indices spanning all MPC announcements since the adoption of inflation targeting. We then test whether these communication sentiments explain subsequent interest rate decisions. Our results show that the SARB communicates confirmation far more frequently than uncertainty, reinforcing policy credibility and continuity. Furthermore, while high inflation forecasts strongly predict policy tightening, elevated levels of communicated uncertainty are associated with policy easing or inaction. This asymmetric reaction highlights a conservative approach, where the SARB maintains policy inertia and changes interest rates gradually, waiting for definitive data to dissipate uncertainty.

We examines the interaction between macroeconomic variables and the fiscal and monetary policy mix between 2012 and 2019, a period characterized by increased public debt and risk premium and low economic growth. We use a large Bayesian vector autoregressive model and find that monetary and fiscal policy fails to account for the observed lower real gross domestic product between 2012 and 2019. Based on their historical relationship, the results indicate that we should have observed much higher growth, especially during the 2015 to 2019 period. In addition, we find little evidence that the low growth during the period can be rationalized by the much-criticized anti-growth monetary policy.

This paper studies the bank lending channel of monetary policy in South Africa. We measure credit supply with homeloan data from banks and nonbanks and we use monetary shocks via high-frequency asset price reactions to policy announcements in a proxy-SVAR model. We find that the bank lending channel is operative, as banks reduce the supply of homeloans after monetary tightening, negatively impacting the housing market. In addition, we show that the deposit channel underpins the bank lending channel’s effectiveness. After a monetary tightening, banks widen the deposits spread and the volume of deposits shrinks, as expected. Since retail deposits are vital stable funding for banks, this mechanism drives the lending channel.